Why Is Managing Performance Effectively So Challenging?
Hand crafted watches are very complex to create. There are many moving parts, and each must be synchronized with the others if it is going to keep precise time… or even work at all.
Effectively managing employee performance is no less challenging. The list of pre-requisites for effectiveness is long and many of them are extremely difficult to meet.?
What constitutes performance must be defined and agreed upon.
The organization needs to decide what would contribute value and then set objectives and performance standards for incumbents of all roles. Employees must understand how the organization defines their performance and accept the standards as being achievable and appropriate. When there are tradeoffs associated with focusing on different things (quantity; quality; dependability, appropriate behavior and timeliness) there needs to be mutual clarity about which of the alternative approaches to getting the work done is optimal. To be motivated to not only extend one’s efforts but also to focus them on the right things, employees need to continuously know what is expected and how things are going. Assuming all is well during a performance period and then discovering that is not the case at the end of the period is the worst kind of surprise an employee can endure.
Performance must be measured accurately…and correctly attributed to causes. Employees must understand what they are expected to do and be given an appropriate amount of autonomy to do it in the best way. Dealing with customers often raises issues as to whether behaviors or results are the most important. An example of a dilemma is a sales representative being asked for a “facilitation” payment by an official of a foreign government to be allowed to propose on a project. If it is clear the payment is not optional and if there is a belief the payment will end up in the official’s pocket the rep must decide whether a large order justifies a violation of U.S. law prohibiting bribes. Lacking clear direction provided by company policy (and prior practice) makes the decision a guessing game.?Someone operating on pure commission for income will be tempted to offer the bribe than someone whose behavior is the focus.
It is common for managers to pile additional expectations on those who perform well, which can make them prone to being unable to carry the heavier load. If goal setting is used as a tool for defining and measuring performance, it is important to consider goal difficulty as well as goal attainment. Olympic divers are scored on the product of dive difficulty and dive execution, a concept that can be applied to goal-based measurement.
Performance must be measured equitably. Performance evaluations should be based on outcomes, not personal characteristics. Rating friends more favorably than others when there is no work-related justification may seem like managers “just being human,” but it can erode the perception that everyone is competing on a level playing field.? Everyone is subject to cognitive bias (e.g., we think we are better performers than we are). Since our perceptions are our reality, this often leads to believing someone else was unjustifiably rated higher than we were. If there is a suspicion that gender, race or other personal characteristics were the underlying cause it can lead to perceptions of injustice… and today even legal action.
The performance management process must facilitate effectiveness. Having managers check boxes on a standard form (purchased from an office supply store) on a given date each year does not meet the requirements for a sound process. Replacing the form with AI software is unlikely to produce significantly better results. Performance management is a process involving fallible human participants. For the process to produce the required results each participant must know his or her assigned role and be able to play that role well. Decades of evaluating and designing performance management systems has led me to the belief that the most common error is to underinvest in training. Giving participants a manual and assuming they can figure out what has to be done will generally result in people figuring it out differently, undermining the required consistency in administration. For example, having five levels of performance ratings without a common understanding of what constitutes “outstanding” or “meets standards” performance will lead to inaccuracies on a relative basis.?
When doing a trial run of a new system at a client organization recently the percentage of employees rated “outstanding” varied from 1% to 80% across units. Although it is possible this is true it is highly unlikely. People have different levels of expectations (this author when managing a large regional consulting office was prone to excessive severity) and this erodes the potential effectiveness of the system. When in school we all probably believed the teacher down the hall gave out A’s generously and our teacher hardly ever gave them. Perception being our reality then creates a belief the process is inequitable (disfavoring us).? When designing a system, I ask that employees be trained as thoroughly as managers, since mutual acceptance demands a common understanding. It is also important to have a calibration process that has managers work with each other to ensure their standards are equivalent, since this will increase the confidence level of everyone.
The consequences associated with performance must be understood and viewed as equitable, competitive and appropriate. For organizations using merit pay systems to motivate performance it is necessary to tie base pay adjustments to performance.? Although outstanding performers accept a 4% increase as a result of their performance rating they might think it inadequate if those “meeting standards” received 3% increases. More does not necessarily mean sufficiently more. Yet for the last decade most organizations have budgeted around 3% for base pay adjustments, so economic constraints may preclude greater differences. Some organizations augment pay rate adjustments with cash awards to produce greater spreads between employees… or reserve a portion of the budget for outstanding performance awards.
The model below bases the size of base pay increases and cash awards on two criteria… performance rating and the position of the pay rate within the pay range. This model can promote consistency across managers and can communicate the stakes associated with performance for employees.
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Although the differences between performance ratings and base pay increases (BPI) is small, this is a byproduct of the small budgets that have prevailed over the last decade. The size of the BPIs is also lessened by carving out 1% for cash awards, but this creates more meaningful differences when both BPIs and CAs (cash awards) are considered. In order to fund the awards this particular guidechart the rating distribution must approximate 10% of employees rated “outstanding” and 20% rated “exceeds standards.”? There may also be employees paid outside of their assigned pay ranges and policy must dictate how they will be treated. Most organizations mandate bringing those paid below range minimum up to the minimum. Many pay cash awards to top performers who are paid above the range maximum as well.?
Sustained high levels of performance justify recognition in some form, although how this is done should be consistent with the culture. The reality is that managers tend to confront employees when something is wrong but less likely to engage in meaningful feedback and recognition.
Promotions or special assignments can also be used as a form of reward. One of the questionable assumptions about promotion decisions is that an employee who has been the highest performing software programmer should be the first choice for a software programming manager job. There are significant differences between doing and managing and caution should be exercised when past performance in a different role is used to predict success. It may be prudent to create a trial period or phase-in plan (e.g., letting the person lead projects prior to selection as a manager).?
Nothing is easy when performance management is concerned. But how sound the system is will have such a profound impact on workforce effectiveness. So follow Einstein's advice: "the answer to resolving issues should be as simple as possible... but no simpler."
About the Author:?Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.